Commodities

The demand for oil in 2015 will drop to its lowest level since 2002 because of an oversupply of crude and stagnant economies in China and Europe, according to OPEC's latest forecast. And that's just one of several sour estimates.

Oil prices have declined for the better part of the past five months. The unexpected contraction in the Japanese economy in Q3 underscores that the strong supply growth is taking place amid weakening demand. OPEC's meeting is still ten days away. Remember that OPEC oil is mostly the heavy sour variety, while the US shale product is mostly light sweet. This means that even if OPEC can agree and implement a cut in output, it may not have as much impact on the US benchmark WTI as it may appear.

In the commodity world, lithium has been a rising star as its use and prevalence has skyrocketed in recent years. Even renowned investment sage Warren Buffett chose to invest in a little-known Chinese battery producer in 2008, eventually earning back nearly $1 billion. Is it too late to jump on the bandwagon, or are there still opportunities for you to capitalise on the trend?

When the price of gold crashed in April, some analysts were quick to point out that the gold market may well be manipulated by large banks. However, the fact that authorities are turning a blind eye to the alleged manipulation of gold suggests that higher powers may actually have a hand in the rigging.

Gold has been touted a safe store of wealth, particularly when there are serious risks to global financial markets. However, gold suffers from wild price gyrations when the markets become too disruptive, and data suggests that gold prices are regularly manipulated for the benefit of large banks and to the detriment of any retail investor trying to protect their wealth by investing in gold.

In recent interviews, Bill Gross, the legendary co-founder of Pimco and manager of the world's biggest bond fund, has stated his belief that gold will do well in 2013. That Gross, renowned as the “Bond King”, would pick gold as the year’s best buy over a bond is very telling about what he expects for the future; but investors remain unconvinced.

On January 14, Deutsche Bank published their 2013 market outlook in which they identified several geopolitical hotspots to worry investors and businesses. They include a wide range of developed and less developed economies, many of which are key producers of commodities and/or a key link in product supply chains. If something goes awry in any of these hotspots what will be the impact on commodities?

Commodity prices swelled in the last decade – mostly on the back of insatiable demand from China. Yet, if you exclude China, global demand for commodities like steel, for example, grew only 2 percent per year in the last twenty years, implying that China accounted for almost all the increase in global demand in the last two decades. With a China slowdown and rebalancing on the cards, could a subsequent commodity market crash be imminent?